Australia: What is estate planning?

IN BRIEF - DON'T FORGET TO CONSIDER OWNERSHIP OF NON-ESTATE
ASSETS

Estate planning is the formulation of a plan that deals with the
distribution or succession of your assets when you pass away. In
addition to this, it also involves the implementation of documents
during your lifetime—such as an appointment of enduring power
of attorney and an appointment of enduring guardian—that will
allow others to make decisions on your behalf when you are absent,
when you require assistance or when you are no longer able to make
decisions for yourself.

ASSETS THAT DO AND DON'T FORM PART OF YOUR ESTATE

Your estate is comprised of all items held in your sole name.
Examples of your estate assets may include:

bank accounts

cash

motor vehicles

real property

personal items such as jewellery, artwork and furniture

Often, clients incorrectly assume that control over an asset
means ownership. This can lead to poor estate planning. Some
examples of assets that do not automatically form part of your
estate include:

property held as joints tenants such as real property, bank
accounts and shares

superannuation

life insurance

trust property

company property

It is important to correctly identify ownership so that a plan
outlining how you would like those assets dealt with on your
passing can be put into place. This may require preparation of
documents such as nominations, deeds, agreements or transfers.

Below are some useful tips to consider.

SUPERANNUATION AND THE RISK OF NON-BINDING NOMINATIONS

As superannuation does not automatically form part of your
estate, you should prepare the appropriate binding death benefit
nomination to either direct superannuation proceeds into your
estate or, to certain beneficiaries.

Case example: Jack had $100,000 in an industry superannuation
fund. Jack completed a non-binding death benefit nomination for his
superannuation in favour of each of his four children. Jack passed
away. As Jack's superannuation nomination was not binding, the
trustee of his superannuation fund decided to pay his
superannuation proceeds to two of his four children. The two
children who were under 18 years of age received $50,000 each. His
two children who were over 18 didn't receive anything.

It is important to seek legal or taxation advice when preparing
superannuation nominations.

JOINTLY OWNED PROPERTY - WHAT HAPPENS WHEN A JOINT OWNER
DIES?

When property is held jointly with another, on the death of a
joint owner, the surviving joint owner may receive the remaining
share of the property. If you would like the ability to deal with
your share via your Will, you should consider altering how the
property is owned.

Case example: Jill owned a property in Sydney with her friend
Jake as joint tenants. Jill prepared a Will and left her whole
estate to her son and daughter equally. The property was the main
asset of Jill's estate. Jill passed away. Jill's children
thought that they would receive the home that their mother had been
living in. As Jill owned the property jointly with Jake as joint
tenants, on her death it did not fall into her estate. Jake
received Jill's share of the property and as a result
Jill's children received substantially less than what Jill
intended for them to receive.

CONSIDER AN ENDURING POWER OF ATTORNEY AND APPOINTMENT OF
ENDURING GUARDIAN

At the same time that you arrange for the succession of your
assets and for your Will to be finalised, you should consider
implementing documents that can be relied on to assist you during
your lifetime. Two key documents are an Appointment of Enduring
Power of Attorney*, to deal with financial decisions to be made on
your behalf and an Appointment of Enduring Guardian*, to deal with
medical decisions to be made on your behalf. To find out more about
these documents, read our recent articles:

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